Net Neutrality and Regulatory Reform

The Senate might vote this week on Sen. Hutchison’s resolution of disapproval for the FCC’s net neutrality rules. If ever there was a regulation that showed why independent regulatory agencies ought to be required to conduct solid regulatory analysis before writing a regulation, net neutrality is it.

For more than three decades, executive orders have required executive branch agencies to prepare a Regulatory Impact Analysis accompanying major regulations. One of the first things the agency is supposed to do is identify the market failure, government failure, or other systemic problem the regulation is supposed to solve. The agency ought to demonstrate a problem actually exists to show that a regulation is actually necessary.

But the net neutrality rules have virtually no analysis of a systemic problem that actually exists, and no data demonstrating that the problem is real. Instead, the FCC’s order outlines the incentives Internet providers might face to treat some traffic differently from other traffic, in a discussion heavily freighted with “could’s” and “may’s”. Then it offers up just four familiar anecdotes that have been used repeatedly to support the claim that non-neutrality is a significant threat (all four fit in paragraph 35 of the order). The FCC asserts without support that Internet providers have incentives to do these things even if they lack market power, and indeed in a footnote it dispenses with the need to consider market power: “Because broadband providers have the ability to act as gatekeepers even in the absence of market power with respect to end users, we need not conduct a market power analysis.” (footnote 87)

Thus far, no administration of either party has sought to apply Regulatory Impact Analysis requirements to independent agencies. If administrations won’t, Congress should.

Jerry Ellig / Jerry Ellig is a senior research fellow at the Mercatus Center at George Mason University. He has also served as deputy director of the Office of Policy Planning at the Federal Trade Commission and as a senior economist at the Joint Economic Committee of the US Congress.